Mortgage settlement leaves most homeowners to fend for themselves
By John W. Schoen, Senior Producer
The Bottom Line at MSNBC
February 9, 2012

ďYouíre hardly skimming the surface,Ē said Paul Dales, a housing economist with Capital Economics. ďIt could help some people a lot, individually. But in terms of the big-picture, overall economy and housing market, itís really just a drop in the ocean of the problem.Ē

.... the vast majority of more than 11 million homeowners who owe more than their house is worth, along with six million who are in foreclosure or behind in their payments, wonít get help. Thatís because the settlement applies only to loans held on the books of the five banks that agreed to settle.

Loans held by government mortgage companies Fannie Mae and Freddie Mac, which account for more than half of U.S. residential mortgages, arenít eligible. Nor are most loans that were sold off to private investors or are held by lenders who arenít part of the settlement. (State and federal officials are negotiating with other lenders to try to expand the reach of the program. The deal wonít be finalized until a federal court judge signs off, which settlement negotiators say they expect in a few weeks.

Under terms of the settlement, the five lenders wonít have to pay out the bulk of the $25 billion. Some $17 billion represents credits applied toward targets lenders have to modify some of the loans on their books. Some of those modifications would have happened anyway. Based on a complex formula, bankers will earn credits on a sliding scale depending on the type of modification. The least costly refinancing methods might earn a lender as little as a nickel on a dollar; the costliest would generate a dollar-for-dollar credit.